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Investing while Fed's in limbo

Wednesday, August 01, 2012 - 02:23

Aug. 1 - While the Federal Reserve fails to announce new ways to boost economic growth, strategists say there are still places for investor to put their money while the U.S. economy remains in limbo. Jeanne Yurman reports.

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The Federal Reserve has tried to use a range of tools to resuscitate the economy, catching Wall Street's attention. But for now the Fed is not introducing any new stimulus according to its latest policy statement. While its tone was a bit more dour since the June meeting, the Central Bank is keeping its plans for low interest rates until at least late-2014. John Manley of Wells Fargo's Advantage Funds SOUNDBITE: JOHN MANLEY, CHIEF EQUITY STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "I think the fact that they're ready to do something is a very comforting sign to investors--that they're going to sort of cover our backs for the time being." Current Fed policy means Americans continue to face low interest rates for at least the next two years. Good news for those seeking loans. Not so good for those wanting interest income like retirees. The solution? Manley says there are some relatively low priced stocks worth grabbing right now. SOUNDBITE: JOHN MANLEY, CHIEF EQUITY STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "I want large capitalization, high quality growth companies that pay what I'll call a Treasury-plus yield. Two to four percent or something like that, that have a lot of cash, a strong cash flow, market dominance as more and more baby boomers reach the point where they want to retire." Two sectors he likes: healthcare and technology. And while U.S. Treasuries are returning next to nil, LPL Financial's John Canally says consider other debt. SOUNDBITE: JOHN CANALLY, VP/INVESTMENT STRATEGIST, LPL FINANCIAL (ENGLISH) SAYING: "We think despite the recent headlines that the muni bond market is a pretty good opportunity. You're getting yields that are actually higher than Treasury yields but you still get the extra tax benefits." Or if you're a little more risk tolerant you might look at corporate bonds. SOUNDBITE: JOHN CANALLY, VP/INVESTMENT STRATEGIST, LPL FINANCIAL (ENGLISH) SAYING: "Especially the high yield corporate bond market where some of the Fed's actions have helped those high yield issuers refinance debt. Their credit metrics are much, much better than they were and their yields are quite attractive." The Fed may still unveil another tool to goose U.S. growth--possibly before its September meeting. But that may only have a short term impact. Ultimately the U.S. economy will be in limbo until a number of factors improve--many of which are out of the Fed's control. Jeanne Yurman, Reuters.

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Investing while Fed's in limbo

Wednesday, August 01, 2012 - 02:23